Should I add my child as a joint owner of assets?

A parent might consider adding an adult child as a joint owner of assets. The objectives often include reducing taxes at death, avoiding probate and giving the child access to manage the parent’s affairs.

For Federal Estate Tax purposes, no reduction is generally achieved because the full value is taxable unless the child can prove contribution. However, the current $5,490,000 (indexed) exemption amount covers most people.

For Pennsylvania Inheritance Tax purposes, only a decedent’s proportionate interest is subject to tax (regardless of contribution), provided joint ownership was not created within one year of death. Accordingly, Pennsylvania tax may be reduced, as long as the child does not predecease the parent.

Possible gift ramifications associated with joint ownership must also be considered.

Potential disadvantages to joint ownership include access to the assets by the child’s creditors and the parent’s loss of full control and possible enjoyment of the property.

If avoiding probate is a concern, other options exist (e.g., a revocable trust) without the potential disadvantages of joint ownership.

Also, a revocable trust or power of attorney may be available to enable the child to manage the parent’s affairs.